Toward the Future of Friction-Free Fund Administration

Data is still the differentiator for Ultimus LeverPoint, say James Cass and Jason Stevens, as API technology begins to drive deep value and efficiency in fund administration services.

Feb 14, 2024

| Blog | Client-Centric | Data Management | Private Funds | Technology and Innovation

In the competitive landscape of fund administration, technology stands out as a primary differentiator among service providers. As the financial industry evolves and regulatory requirements become more stringent, fund administrators increasingly rely on innovative technological solutions to enhance their offerings and stay ahead of the curve.

From advanced data analytics and automation to APIs and robust cybersecurity measures, technology plays a pivotal role in enabling fund administrators to deliver superior services, streamline operations, and meet the diverse needs of their clients. In this digital transformation era, the effective utilization of technology has become a key determinant of success for fund administrators seeking to differentiate themselves in the market and provide added value to their clients.

When it comes to fund administration and technology, what excites Ultimus LeverPoint most?

James Cass: Application programming interfaces (APIs) where data can be exchanged more freely among platforms – it’s something we’ve embraced in our organization. When we have conversations with our clients, and their clients, about what data they require from us. We then ask every vendor we use the same questions: What’s your API strategy? What data is available? When can we get it? So, we can get data to clients without building large batch files and having multiple business analysts spend countless hours on a simple request.

For us, embracing APIs offers a more efficient way to move information and data from one platform to another, and then from there to make it useful for end investors and our GP clients.

How do fund administrators keep up with the pace of technological change?

Jason Stevens: Let’s rewind five or ten years and recognize the speed of technology. API technology has progressed considerably in the areas of scale and performance. Back then, it might have been more beneficial to build a data warehouse and then build things on top of it strictly for performance. But API technology has moved so fast that the ability to pull data from a system has nearly put data warehouses on the path to becoming obsolete. You don’t need that secondary data warehouse anymore and run the risk of inconsistent data when compared to the primary source. Now, you can rely solely on the golden source data in your core systems knowing that the speed of APIs can be leveraged to access the underlying data as needed.

James Cass: Keeping up with the pace of technology is a cultural thing, and it drives more innovation and creativity within our organization. A lot of other fund administrators don’t view it the same way. They’re stuck in the same creation cycle they were ten years ago. It’s hard to get out of it when you take so long turning ideas into action. Our platform is nimble because people like Jason, our CTO, embrace this technology and the way to move data back and forth. This is good for keeping our expenses low, so we can spend those dollars on our people and other surrounding technology.

Are you surprised by the rate of progress with data and APIs?

James Cass: The technology just caught up with people’s desire to get high-quality data in a timely manner. The demand for the data was always there, but the friction was always in moving data efficiently. The old system of sending batch files was an overnight process and it would take a long time to assemble. So, I’m not surprised at the rate of progress with APIs because the desire was always there to share data. We just didn’t have the technology to make that possible until APIs came along.

Looking to the future, what kind of innovation might we soon see in your space?

Jason Stevens: Digitizing and normalizing data is key in order to take advantage of newer innovative technologies like Robotic Process Automation (RPA), Machine Learning or Artificial Intelligence. But this can be tricky as many firms in this space still utilize tools like Excel and PDF to capture and store data. Implementing best practices and data standardization, even when using end user tools like Excel can make a major difference when looking to wrap more robust technologies around your data. Digitization is key so that different technologies can communicate back and forth seamlessly with the underlying data.

How do you think AI technology and natural language processing models will work their way into the world of fund administration?

Jason Stevens: Obviously, Chat GPT (Chat Generative Pretrained Transformer) has captured the public imagination. Security is a major concern when looking at implementing technology like this into an organization and is likely not feasible in the private equity space. But proprietary AI and custom algorithms can definitely play a role. We see future value in consulting, and the ability to build algorithms on top of our clients’ data to get things like predictive analysis to identify correlations to improve their business. Training and onboarding new users through AI is another plausible future use case. But a solid data foundation is an absolute must when considering implementing technologies like Machine Learning and AI.

Right now, we’re not hearing a lot of direct demand for machine learning and AI functions in fund administration, but there are a lot of questions around what this all means. So, we’re doing a lot of research there – learning where the impacts can be today and what needs to happen to bring forward the impacts of tomorrow. But everything’s data driven. If you get your fund administration data in order, you’ll be able to take advantage of these newer technologies to help drive your business.

When it comes to the application of tech in fund administration, what separates a good administrator from a great administrator?

James Cass: There’s a great connection between the operations teams: fund accounting, portfolio accounting, investor relations, financial reporting, tax and treasury teams in our organization and our technology team. Listening to the folks who are client facing on a daily basis and working directly with the specific problems – those getting the information out, dealing with the crescendos of the financial packages, the regulatory filings, the call notices, the distribution notices and other investor correspondences. They’re the ones coming up with the best ideas and opportunities to automate and innovate. Our teams are working side by side, looking at these problems together. This is a cultural comradery we have, that many other organizations, specifically fund administrators, do not.

We know that working together on technology today will not only make employees’ lives better but clients’ lives too and drive greater efficiency.

In conclusion, integrating technology in fund administration has revolutionized the industry by enhancing efficiency, transparency, and compliance. From streamlining processes to providing real-time insights, technology has become an indispensable tool for fund administrators to navigate the complexities of managing investment funds in today’s dynamic financial landscape. As technology continues to evolve, it will be crucial for fund administrators like Ultimus LeverPoint to stay adaptable and embrace innovative solutions to meet the ever-changing demands of clients, investors, and regulatory requirements.

ULP #17890782 2/13/2024

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